October 18, 2018

Financial regulatory reform

Accounting News Roundup: FinReg Brings Plenty of Change; Some Number Crunching of Goldman’s Fine; ATF: Sin Taxes Rose 41% | 07.16.10

Law Remakes U.S. Financial Landscape [WSJ]
The Journal asked twelves experts about the bill, many of whom are not nearly as impressed as the Deal Professor. “Congress approved a rewrite of rules touching every corner of finance, from ATM cards to Wall Street traders, in the biggest expansion of government power over banking and markets since the Depression.

The bill, to be signed into law soon by President Barack Obama, marks a potential sea change for the financial-services industry. Financial titans such as J.P. Morgan Chase &Group Inc. and Bank of America Corp. may be forced to make changes in most parts of their business, from debit cards to the ability to invest in hedge funds.”

Apple May Offer IPhone Cases, Rebates to Address Flaw [Bloomberg]
Start forming the lines again, “Apple Inc., looking to avoid a recall of the iPhone 4, may give away rubber cases or offer an in-store fix to address a design flaw in the newest version of its top-selling product, according to analysts.

The company, which is holding a news conference at 1 p.m. New York time today, doesn’t plan to announce a recall, a person familiar with the matter said yesterday. Chief Executive Officer Steve Jobs may instead offer the giveaways or refunds to dissatisfied customers, some analysts said.”

Google CFO: Old Spice Is The Future [Tech Crunch]
Written on a horse: “You know you’ve got a viral marketing hit on your hands when the CFO of Google mentions it in an earnings call. Yes, I am talking about the Old Spice YouTube Tweetathon where the bare-chested Old Spice Man addresses people on Twitter via personalized commercials on YouTube.”

Goldman’s SEC Settlement by the Numbers: We Do the Math [ProPublica]
Effectively, it will be paid for by August 1.


AIG Says It Counted as Much as $2.3 Billion of Repos as Sales [Bloomberg BusinessWeek]
Somewhere a former Lehman CFO is screaming, “See, I told you everyone was doing it!”

“American International Group Inc., the bailed-out insurer, said it classified as much as $2.3 billion of repurchase agreements and $3.8 billion of securities- lending transactions as sales in calculating quarterly results.

In late 2008, ‘certain of AIG’s counterparties demanded significantly higher levels of collateral to enter into repurchase agreements, which resulted in sales rather than collateralized-financing’ treatment under accounting guidelines, the New York-based insurer said in an April 13 letter to the Securities and Exchange Commission released today. The accounting didn’t materially affect any ratios or metrics the company publicly disclosed, AIG said in the letter.”

‘Sin Tax’ Revenue Surges [TaxProf Blog]
“The Treasury Department’s Alcohol and Tobacco Trade and Tax Bureau has released its Fiscal Year 2009 Annual Report, detailing a 41% increase (to $20.6 billion) in the amount of “sin taxes” on alcohol, tobacco, firearms, and ammunition collected by the federal government. Most of the $6 billion revenue increase resulted from the higher tobacco taxes included in the Children’s Health Insurance Reauthorization Act of 2009. Firearms and ammunition excise tax collection rose 45%, the largest annual increase in the agency’s history.”

Thumbs Up or Down on Financial Regulatory Reform?

The answer to that question for both proponents and detractors of the bill is to read it. All of it. Then decide.

~ Steven M. Davidoff, the Deal Professor, read all 2,300 some-odd pages and just assigned all of you some homework. It’s going become law after all.

The Frank-Dodd Act Could Solve Part of the Unemployment Problem

“In 2,500 pages of dense prose, we’re about to receive legislation that could better be entitled ‘The Lawyers’ and Lobbyists’ Full Employment Act.”’

~ Harvey Pitt, former SEC Chairman, graduated with his law degree from St. John’s in 1968.

Accounting News Roundup: Americans’ Irrational Demands on Policy; Number of Women CFOs Same as ’09; Summer Camp Tax Credits? | 07.14.10

We Can’t Always Get What We Want: Why Governing Americans is So Hard [TaxVox]
Basically it’s because as a group, we’re children. We throw tantrums until we get what we want and stomp around the living room when we don’t.

“[O]ur demands on policymakers are so inconsistent and irrational that we make governing nearly impossible. We hate big deficits, but oppose the actual tax increases or spending cuts that we need to dam the flood of the red ink. We are furious that government passed an $800 billion stimulus last year, but feel lawmakers are not doing enough to get the economy going. We want government to “do something” about the gulf oil spill but reject government interference in private business.”

Women CFOs Holding Steady [CFO]
In the Fortune 500, there are 44 woman CFOs, the same number as last year.

“What are the prospects for women breaking the 10% barrier? At least some are hopeful the numbers will climb in coming years, albeit not dramatically. ‘Anecdotally, I am seeing a next generation of female finance leaders who can and want to rise to the CFO role,’ says Lorraine Hack, executive recruiter with Heidrick and Struggles. She adds, ‘I have seen a lot of companies becoming more cognizant of diversity, or the lack thereof, and making a conscious effort to recruit, retain, and grow such talent.’ ”

U.S. Business Groups Air Policy Concerns [WSJ]
“Washington’s major business groups plan a united front Wednesday in their confrontation with the Obama administration over economic policy, calling on the White House to cut taxes and curb its regulatory agenda.

Business groups including the U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Businesses will air a list of concerns about government policy at a “Jobs for America Summit” at the Chamber’s offices Wednesday.”


Wall Street Fix Seen Ineffectual by Four of Five in U.S. [Bloomberg]
“Almost four out of five Americans surveyed in a Bloomberg National Poll this month say they have just a little or no confidence that the measure being championed by congressional Democrats will prevent or significantly soften a future crisis. More than three-quarters say they don’t have much or any confidence the proposal will make their savings and financial assets more secure.

A plurality — 47 percent — says the bill will do more to protect the financial industry than consumers; 38 percent say consumers would benefit more.

‘Banks and the government are making out, not the ordinary person,’ says Lenore Critzer, a 70-year-old retiree and poll participant who lives in Nelson, Ohio, about 40 miles from Cleveland. ‘We’re going to have another crisis and worse.’ ”

A tax credit for summer camp? IRS says it’s true [Kansas City Star]
Unfortunately, expenses for overnight camps do not qualify. So parents will have to squeeze the sex in during the day somehow.

Despite Big Name Supporters, SEC Self-funding Falls By the Wayside

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

As President Obama gearsng financial regulatory bill, one little discussed but important potential provision that did not survive the final version would have provided for self-funding by the Securities and Exchange Commission.

This is a policy advocated by people like New York Senator Chuck Schumer and Representative Barney Frank as well as SEC chairman Mary Schapiro. It would enable the agency to use some or all of the fees and/or fines it collects to pay its bills.


In fact, other financial regulators are currently self-funded, including the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

Wachtell Lipton Rosen & Katz points out that a proposal that the SEC should be able to fund itself based on the fees it collects was ultimately rejected. Instead, the conferees agreed that the SEC should continue to be subject to the Congressional appropriations process, and provided for certain baseline appropriations through 2015, according to the law firm. It adds that the proposed Act also requires the White House to submit unaltered to Congress the SEC’s annual budget, and establishes a $100 million reserve fund.

This is a controversial issue and current and past commissioners are divided over whether this is a good idea.

Opponents say self-funding would create a conflict of interest because it would increase the SEC’s incentive to seek the largest possible fines. Former commissioner Luis Aguilar, who supports self-funding, is sensitive to these concerns. So, he supported self funding, but only based on fees and registrations, not fines.

He had pointed out that the 2010 budget of slightly more than $1 billion is well below the $1.4 billion or so the SEC figures to bring in from those fee sources. Self-funding could also enable the SEC to attract better candidates by increasing the pay scale, something Representative Frank says he supports.

One former chairman told me last year he doubts Congress would go along with self-funding. He asserts the system of campaign finance has given the business community leverage over Congress, whose main lever of control over the SEC is its budget. “When big patrons come to see them and say stop the SEC, the power of the purse is critical to them,” the former chairman insists.

Back in June, 40 prominent securities lawyers fired off a letter asserting that a self-financed SEC “is one of the most important parts of the financial services reform legislation presently before you.”

They pointed out that from 2005 to 2009, the SEC collected about $7.4 billion from transaction and registration fees, which were turned over to the government, but Congress appropriated just $4.5 billion for the agency’s budget during that period. “The chronic under-funding of the SEC has severely impeded the SEC’s ability to keep pace with market and technology changes,” the lawyers stated. “After shrinking in size for a number of years, the SEC is only now beginning to grow again. Meanwhile, the securities industry and corporate activities it regulates have grown tremendously in size and sophistication over the last two decades.”

They noted that between 2004 and 2007 SEC enforcement and examination staff declined 10 percent and its information technology initiatives plunged 50 percent, while at the same time, trading volume doubled, the number of investment advisers jumped 50 percent and the funds they manage grew almost 60 percent.

In a speech in June, Schapiro insisted that self funding ensures independence, facilitates long-term planning, and closes the resource gap between the agency and the entities the SEC regulate. “In the process, it allows the SEC to better protect millions of investors whose savings are at stake,” she added.

Self funding also ensures an SEC that is more effective at identifying and addressing the kinds of risk that dealt a significant blow to the American economy, she told her audience.

Schapiro pointed out that in the immediate post-Enron era, the SEC saw significant increases in its budget. But funding dropped just as markets were growing in size and complexity. At the height of the pre-financial crisis frenzy, Schapiro added, the SEC was actually forced to reduce staff. “Only now can we afford to begin to develop the new technology that will allow us to evaluate, store and retrieve the kind of tip information that might stop the next major fraud,” she said.

Schapiro said self funding would have many benefits for investors: It would allow the SEC to increase its professional and technical capacity, to keep up with the financial industry’s rapid growth; It would enhance our long-term planning process, allowing the SEC to address the increasingly sophisticated technologies, products, and trading strategies adopted by the financial services industry; and, It would provide the flexibility to react to developing risks in the same way that our domestic and foreign counterparts did during the recent financial crisis, with rapid staffing and strategic responses that help control systemic damage.

She added: “To truly protect investors to the best of their abilities, they need the independence, planning ability and resources that self funding provides.”

Accounting News Roundup: Financial Reform Inches Closer; Small Biz Continues with Bleak Outlook; Kwame Kilpatrick Gets Tax-Funded Counsel in Tax Fraud Case | 07.13.10

Finance Bill Close to Passage in Senate [WSJ]
“Two Senate Republicans said Monday they would support the Obama administration’s financial-overhaul legislation, and Democrats now believe they have the 60 votes needed to push the sweeping bill into law by the end of the week.

Sens. Scott Brown of Massachusetts and Olympia Snowe of Maine both said they would vote for the measure when Democrats bring it to a vote, which could happen as soon as this week. Democrats and administration officials believe this gives them the necessary backing to overcome a potential filibuster after weeks of uncertainty and unexpected pitfalls.”

Abu Dhabi May Make BP Investment, Crown Prince Says [Bloomberg]
“Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al Nahyan said the emirate is considering making an investment in BP Plc.

‘We are still thinking about it,’ he said in an interview in Abu Dhabi today, when asked about potentially buying a stake in the London-based oil producer. ‘We are looking across the board. We have been partners with BP for years.’

BP Chief Executive Officer Tony Hayward said on July 7 that he had a “very good” meeting with the crown prince as analysts said the oil producer may be looking for support from Middle East investors. BP shares have gained 26 percent since the start of July as the company gets closer to containing its leaking well in the Gulf of Mexico, the worst oil spill in U.S. history.”

Small Businesses Get More Pessimistic [WSJ/Real Time Economics]
“Small businesses continue to feel highly pessimistic about the U.S. economic outlook, according to a report Tuesday that showed a monthly indicator of their sentiment turning weaker in June.

The National Federation of Independent Businesses said its Small Business Optimism Index dropped 3.2 points to 89.0 last month, more than erasing the modest 1.6-point gain it saw in May. The report, which was compiled by NFIB Chief Economist William Dunkelberg, described the decline as ‘a very disappointing outcome.’ ”


Kilpatrick expected to ask for court-appointed counsel for fraud case [WXYZ]
Kwame Kilpatrick needs taxpayers’ help in his tax fraud case, namely paying for a lawyer. Since he cannot afford one, the people of Michigan will be picking up the tab.

Man Claims Ownership of Facebook [WSJ]
Today in wild-ass lawsuits, “A New York judge has issued a temporary restraining order restricting the transfer of Facebook Inc.’s assets, following a suit by a New York man who claims to own an 84% stake in the social-networking company.

Paul D. Ceglia filed a suit in the Supreme Court of New York’s Allegany County on June 30, claiming that a 2003 contract he signed with Facebook founder and Chief Executive Mark Zuckerberg entitles him to ownership of the company and monetary damages.”

The Way Things Are Going, Eventually No One Will Have to Comply with Sarbanes-Oxley Section 404

As we trudge toward a Senate vote on he financial reform bill, one issue that is of utmost interest to those in the accounting/audit biz is that of small businesses complying with Section 404(b) of Sarbanes-Oxley.

As it stands, only a small number of non-accelerated filers are voluntarily in compliance with 404. Those not jumping at the voluntarily complying with 404 have enjoyed the repeated delays by the SEC since the legislation was passed in 2002.

But if reform bill passes in its current form, all companies with market caps of less than $75 million will be exempt from complying with the requirement to have an audit of their internal control system. And even those companies that went to the trouble of voluntary compliance, might not continue doing so:

Dan Crow is one of the few small-company CFOs with an auditor’s stamp on his internal controls. Getting it wasn’t as time-consuming or as costly as it would have been several years ago, when large public companies first began complying with one of the most onerous requirements of the 2002 Sarbanes-Oxley Act, known as Section 404.

Still, Crow, who oversees finance for retailer Hastings Entertainment, doesn’t rule out dropping the extra review next year if Congress decides to permanently exempt small public companies from needing an auditor’s sign-off on their internal controls — as it seems poised to do. The Senate is expected to vote this week on the final version of the financial regulatory reform bill, which would exempt companies with market caps less than $75 million from complying with Section 404(b), the rule in question. (The House has already passed the bill.)

But that’s not all! Because 404(b) is clearly “red tape” (a popular rallying cry in an election year) that provides no benefits whatsoever and just crushes the spirit of small business (the backbone of America, we might add!) Congress has called for a study of “how the ‘burden’ of 404(b) compliance for companies with market capitalization between $75 million and $250 million could be reduced, and whether an exemption for them could increase the number of initial public offerings in the United States,” in the bill.

Christ, where does it end? Let’s just study the whole damn thing over while we’re at it. Apparently the entire Congressional body has completely ignored the benefits of Sarbanes-Oxley; never mind that costs of gone down significantly in the past eight years, making compliance less financially painful.

And not to mention that smaller companies are at greater risk for fraud and accounting manipulation. Look at the roster of companies on Sam Antar’s website and you’ll note that many of them have market caps of $1 billion or less. If these companies can’t resist the temptation to get shifty with financial reporting in order to meet (or not) the short-term focus of Wall Street, it’s difficult to reason that even smaller public companies won’t succumb to it.

To 404(b), or Not to 404(b)? [CFO]

Accounting News Roundup: Grassley Not Sold on Financial Reform Bill; LeBron Was Probably Considering Tax Implications; Target: Your Spreadsheets | 07.09.10

Grassley Airs Concerns As Vote Nears on Financial Bill [WSJ]
“Iowa Republican Sen. Charles Grassley is ‘very concerned’ about a provision in the financial overhaul bill designed to pay for the leaid Thursday, potentially complicating White House efforts to build a filibuster-proof majority to back the measure.

If Mr. Grassley decides to vote against the bill, Democrats would be left with little margin for error when they bring the bill to the Senate floor, which could happen as soon as next week. Mr. Grassley was one of four Republicans to support an earlier version of the bill when it narrowly passed the Senate in May.”

Number of CEOs Stepping Down is on the Rise [FBN]
It’s hard out there for a CEO. Ask Russ Smyth.

State Jock Taxes: Is LeBron Better Off in Miami? [Tax Foundation]
Of course Florida has no income tax, so every game that LBJ plays in Florida he’ll have a tax liability of $0. What about the other 41 games outside of FLA? That’s another story, “True, if James plays in Miami, none of his neighbors will be paying state income tax, but thanks to the jock tax, LeBron will.

While most people who travel in their jobs pay state income tax only to their home state, which is zero in Florida, athletes get special attention. In the NBA, each player’s per-game salary is computed, and whenever a team is on the road, the players must pay whichever tax rate is higher, the home state’s or the away state’s.”


Facebook Often Not a Job Seeker’s Friend [FINS]
If you’re pounding the pavement for a new job out there, it’s pretty much a given that people are looking at your online activity. But just how much and where? Based on the conversation between FINS’ Kyle Stock asked Michael Fertik of ReputationDefender Inc, you’d better drop those loser friends from high school that have appeared on Cops:

Kyle Stock: Can you speak briefly on to what extent companies are checking up on candidates online?

Michael Fertik: They’re absolutely doing it. It’s somewhere around 70% to 80% of hiring managers. . . And not only are they looking online, they are also looking in really remarkable places like virtual worlds and gaming rooms.

KS: To what extent do people realize this is going on?

MF: Somewhere around 70% of employers are considering online information when evaluating a candidate and only 7% of candidates believe they are doing so. There’s a huge gulf of understanding. . . Everybody has been opted in. There’s kind of a willful ignorance about it. That’s changing, but it’s still there.

And the kinds of information being considered are growing very diverse. It’s not just the photo that you published of yourself with a beer or a bong, it’s also content like who your friends are and what they post on your page and what kinds of groups that you link to. There’s kind of an associative picture that they develop of you and then they make decisions about you based on those associations.

Russian Spies Head Home in Swap Echoing Cold War [Bloomberg]
Defendant #4 and the rest of the gang are going home, making your next conference predictably more boring. Or will it???

Internal Auditors Target Spreadsheets [CFO]
“Last month the Institute of Internal Auditors plugged a gap in its guidance for members by issuing recommendations for the auditing of ‘user-developed applications,’ which generally are spreadsheets and databases developed by end users rather than by IT personnel.

User-developed applications, or UDAs, are subject to a high level of data-integrity risk because there may not be adequate controls over validating their output or making changes to them, the IIA points out. There is also confidentiality risk, because a UDA and its data typically are easy to transmit outside the company via e-mail.”

Small Business Amendment to Financial Reform Bill Draws Mixed Feelings

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The financial reform bill contains a small-business related amendment that hasn’t received a lot of attention. And it’s either very small-business friendly or very unfriendly, depending on whom you listen to.

Sponsored by Senator Olympia Snowe of Maine, the ranking Republican on the Small Business Committee, it directs the new Consumer Financial Protection Bureau to take into account how proposed regulations would affect the cost of credit to small companies. It also mandates that the bureau be covered by the Small Business Regulatory Enforcement Fairness Act of 1996.

That law, until now, has applied only to the Occupational Safety and Health Administration (OSHA) and Environmental Protection Agency (EPA). It’s aimed at policing proposed regulations that could have a “significant impact on a substantial number of small entities.” In that case, a special government panel has to consult with small businesses who could be affected by the law to see just how they think it could hurt them.


Opponents, like the Consumer Federation, objected to the amendment on the grounds that it required the consumer bureau to consult with the very businesses it regulates. And they said it would slow down the regulatory process, thereby hurting small businesses that need fast access to credit to finance their operations.

On the other hand, such odd organizations as the National Federation of Independent Business–which didn’t much like a whole lot about the rest of the bill–supported the amendment, presumably because they liked including small businesses in the rule-making process.

Who’s right? It’s undoubtedly true that the amendment allows–requires–that the consumer bureau seek input from the folks it’s supposed to regulate. But the bureau doesn’t have to pay attention if it thinks the input lacks merit. The law only says that “Where appropriate, the agency shall modify the proposed rule.” It doesn’t say the bureau is required to modify the proposed rule.

And in the few occasions when a special panel was convened to deal with OSHA and EPA issues, the officials did their work well within the 60-day limit the law requires, according to Rob Mandelbaum in the You’re the Boss blog.

So, on balance, it’s not a bad thing.

Accounting News Roundup: Senate Will Get to Financial Overhaul Post-July 4; Google to Cover Extra Health Benefit Costs for Gay Couples; Barry Wins a Stevie | 07.01.10

House Vote Sends Finance Overhaul to Senate [WSJ]
“The House agreed Wednesday to a sweeping rewrite of the nation’s financial regulations, moving the initiative one step closer to becoming law.

Focus now shifts to the Senate, where questions linger about whether Democrats have nailed down enough support from the handful of Republicans needed to overcome a likely filibuster. The Senate won’t take up the bill until after the July 4 recess, creating an awkward pause in which the bill’s opponents will have one last chance to derail it.”

Google to Add Pay to Cover a Tax for Same-Sex Benefits [NYT]
“On Thursday, Google is going to begin covering a cost that gay and lesbian employees must pay when their partners receive domestic partner health benefits, largely to compensate them for an extra tax that heterosexual married couples do not pay. The increase will be retroactive to the beginning of the year.

‘It’s a fairly cutting edge thing to do,’ said Todd A. Solomon, a partner in the employee benefits department of McDermott Will & Emery, a law firm in Chicago, and author of ‘Domestic Partner Benefits: An Employer’s Guide.’

Google is not the first company to make up for the extra tax. At least a few large employers already do. But benefits experts say Google’s move could inspire its Silicon Valley competitors to follow suit, because they compete for the same talent.”


Senate chairman starts probe of Transocean’s taxes [AP]
Senator Max Baucus (D-MT) would like to know whether Transocean’s move offshore was an exploitation of U.S. tax law, “The chairman of the Senate Finance Committee is launching an investigation into the tax practices of Transocean Ltd., owner of the Deepwater Horizon rig that exploded in the Gulf of Mexico, leading to the massive oil spill.”

Sadly, this will lead nowhere since exploitation ≠ illegal in this case. Deplorable? Yes. Tax malfeasance? No. Political pandering? Absolutely.

Deloitte CEO Barry Salzberg Wins Executive of the Year – Services at the 8th Annual American Business Awards [PR Newswire]
It’s a Stevie award! BS beat out Jeffrey Bezos, chairman, president and CEO, Amazon.com; Dominic Barton, managing director of McKinsey & Company; and Joseph Neubauer, chairman and CEO of ARAMARK for the Stevie.

In his own words, “I am very honored by this recognition, which truly is a testament to Deloitte’s progress and the industry-leading work of our more than 40,000 people in the United States. Although we have faced challenging economic times in the past few years, Deloitte’s diverse portfolio of quality services and investment in talent continue to drive our business and differentiate us in the marketplace. We are eager to approach the opportunities that await us and our clients in the economic upturn.”

GAAP and IFRS: Six Degrees of Separation [CFO]
That is, six major differences between the two sets of rules that will have to be ironed out. Namely: error correction, LIFO, reversal of impairments, PP&E valuation, component depreciation and development costs. After that, this convergence thing will be a breeze.

Accounting News Roundup: Bank Tax Scrapped; Deloitte Cleveland Names New Managing Partner; What’s the Future of Internal Audit? | 06.30.10

Financial-Rules Redo Passes Major Hurdle [WSJ]
Who knew that lobbyists could be so effective? “Democrats initially proposed the $18 billion tax on the nation’s largest banks and hedge funds to cover the cost of expanding gof financial services, among other things. But the small number of Republicans crucial to the bill’s passage balked at the fee, which was added at the last minute to the legislation.

With more than a year’s worth of work in the balance, Democrats ditched the levy on Tuesday. Instead, they agreed to offset the bill’s costs by winding down early the $700 billion Troubled Asset Relief Program and assessing a more modest fee on banks through the Federal Deposit Insurance Corp.”

Volcker Said to Be Disappointed With Final Version of His Rule [Bloomberg]
If you go to the trouble of getting your name on the rule, with specific ideas in mind about what said rule entails, you’d be pretty upset if lobbyists hacked up to the point that it’s hardly recognizable. Plus octogenarians are probably used to getting their way.

“Volcker, the 82-year-old former Federal Reserve chairman, didn’t expect the proposal to be diluted so much, said a person with knowledge of his views. He’s content with language that bans banks from trading with their own capital, the person said.

‘The Volcker rule started out as a hard-and-fast rule on risky trades and investments,’ said Anthony Sanders, a finance professor at George Mason University School of Management in Fairfax, Virginia. ‘But through negotiations, it was weakened and ended up with many loopholes.’ ”


How Not To Look Desperate When Looking for Your Next Finance Job [FINS]
Because we know there are plenty of you out there.

Deloitte names Craig Donnan managing partner in Cleveland [Crain’s Cleveland]
Cake party? Mr Donnan takes over for Pat Mullin who has been the managing partner of the office since 1999.

The future of the internal audit profession [Marks on Governance]
“If we are to be relevant, chief audit executives (CAEs) have to refocus on providing assurance regarding how well management identifies, evaluates, responds, and manages risks – including the controls that keep risk levels within organizational tolerances.”

The Problem With Unreported Income [You’re the Boss/NYT]
The problem being that if you’re going to have one helluva time selling your business if a decent portion of its revenues are unreported.

“Legal and moral issues aside, there is only one way to view unreported income when it comes time to sell the business: forget that money ever existed. If you can only manage what you can measure in business, then the same holds true for what you can sell.”

AIG hires ex-Lehman lawyer as compliance head [Reuters]
As long as AIG doesn’t ask about arcane accounting disclosures, this should work out fine.

Accounting News Roundup: Financial Reform Finalized; Banco Espirito v. BDO 2.0; Small Win for Skilling, Big Loss for PCAOB? | 06.25.10

U.S. Lawmakers Reach Accord on New Finance Rules [WSJ]
By the end of this one, can’t you picture an exhausted Barney Frank with his tie loosened to mid-torso, pants undone with fly wide open open and some staffer dabbing his sweaty brow?

“After more than 20 hours of continuous wrangling, Congressional Democrats and White House officials reached agreement on the final shape of legislation that would transform financial regulation, avoiding last-minute defections among New York lawmakers that had threatened to upend the bill.

After months of uncertainty about how the U.S. would craft new rules, the agreement offers thince the financial crisis of how markets and the government will interact for decades to come. The common thread: large financial companies are facing a tougher leash.”

Just in case you missed it yesterday, former SEC Chairman Arthur Levitt isn’t nearly as excited as some people about the bill. The President is expected to sign the bill before July 4.

Sidenote on this one: how the Journal managed to slip Maxine Waters through as one of a dozen “players” in this bill should cause you to question – if even for just a minute – the credibility of the paper.

Florida Appeals Court Turns Down Heat, For Now, On BDO Seidman [Re: The Auditors]
Francine’s take on the decision by the Florida 3rd District Court of Appeal to order a trial in the Banco Espirito v. BDO case. An event she isn’t thrilled about, “My doubts about the efficacy of a new trial are based on the disappointing, frustrating and completely unsatisfying way the court and the judges in this case have proceeded. Some of the additional comments raised by the Appeals Court do not bode well for this plaintiff’s chances next time around.”


Supreme Court Rolls Back a Law Born of Enron [NYT/Floyd Norris]
In more Congressional ineptitude (at least in the eyes of the SCOTUS), former Enron CEO Jeff Skilling won his case at the high court, arguing that “the concept of committing fraud through depriving an employer of ‘honest services’ was not adequately defined in the law,” Floyd Norris writes.

In other words, the “idea” of fraud being a kickback or a bribe is obvious and was defined. Manipulating mark-to-market and off-balance sheet accounting rules or “something else equally outrageous” were not and thus the law was unconstitutional. Long story/short, Norris writes, is that

Funny story on the way to this Skilling outcome – if the SCOTUS rules against the PCAOB (it is expected on Monday), “It will blame Congress for writing bad laws,” Norris writes. And who forced Congress into action on Sarbanes-Oxley?

BP: Oil-Spill Cost Hits $2.35 Billion [WSJ]
Has anyone handicapped this? Obviously the $20 billion reserve is a good ballpark figure but the overs have to be a pretty solid bet on that. Takers?

Caturano being acquired by RSM McGladrey [Boston Business Journal]
The firm fka RSM McGladrey purchased Caturano and Company, the fifth largest firm in Boston. The deal, if approved by H&R Block, would make RSM McGladrey…the fifth largest firm in Boston.

Accounting News Roundup: Financial Reform Fail; KPMG Wins Latest Round of Auditor Musical Chairs; Philly Tax Amnesty Close to Reaching Goals | 06.24.10

A Missed Opportunity on Financial Reform [WSJ]
Former SEC Chairman Arthur Levitt is none too pleased with the financial reform bill that’s likely to get approved by the Senate and he says exactly why in an op-ed in today’s Journal, “One of many bad ideas that made it into the bill: Public companies will now have a wider loophole to avoid doing internal audits investors can trust. This requirement was the most important pro-investor reform of the last decade, and it worked. Of the 522 U.S. financial restatements in 2009, 374 were at small firms not subject to auditor reviews.”

But that’s not all! Mr Levitt outlinespic failure including:

• “Chuck Schumer’s wise idea to let the Securities and Exchange Commission (SEC) become a self-funded agency will likely be killed by appropriators who are unwilling to give up the power of the purse.”

• “Barney Frank’s (D., Mass.) effort to pass a new law to overcome the legal precedent of the 2008 Supreme Court’s Stoneridge decision, which allows third-party consultants, accountants and other abettors of fraud to avoid liability. Again, another sellout of investor interests.”

• “Congress didn’t deal with the massive problems of Fannie Mae and Freddie Mac. It’s one thing to fail to see trouble before it happens. Now, there’s no excuse. The central role played by these two organizations in the financial crisis is indisputable. Congress had a chance to fully restrict these agencies from anything but the most basic market-making activities, and it didn’t.”

What does all this (and more!) mean? Oh, nothing really. Levitt says that we’ll just have to wait for the next financial apocalypse to get it right.

InfoLogix Announces the Engagement of KPMG, LLP as the Company’s Independent Registered Public Accounting Firm [PR]
McGladrey resigned on June 10th and the company’s filing stated that were no disagreements yada, yada, yada although McGladrey had identified a material weakness in the company’s internal controls and their most recent audit opinion included a going concern paragraph. It wasn’t enough to spook KPMG, who got the blessing from InfoLogix’s audit committee on Tuesday. Enjoy.

BP Relied on Faulty U.S. Data [WSJ]
“BP PLC and other big oil companies based their plans for responding to a big oil spill in the Gulf of Mexico on U.S. government projections that gave very low odds of oil hitting shore, even in the case of a spill much larger than the current one.

The government models, which oil companies are required to use but have not been updated since 2004, assumed that most of the oil would rapidly evaporate or get broken up by waves or weather. In the weeks since the Deepwater Horizon caught fire and sank, real life has proven these models, prepared by the Interior Department’s Mineral Management Service, wrong.”


Leadership changes at Wichita Grant Thornton office [Wichita Business Journal]
“Lori A. Davis is the new managing partner at the Grant Thornton office in Wichita, the company announced Wednesday.

Davis will take the place of Jarod Allerheiligen, who will become the managing partner of the Grant Thornton operations in Minneapolis. The change in responsibilities is scheduled to take place Aug. 1.”

Ex-Detroit Mayor Kwame Kilpatrick indicted by feds on 19 mail fraud, tax counts [Detroit Free Press]
“Despite Kilpatrick’s repeated claims to the contrary, the indictment says he used fund money for campaign and personal expenses, ranging from polling to yoga and golf lessons to college tuition for relatives.

Prosecutors contend he failed to report more than $640,000 in taxable income while mayor that he received in the form of cash, flights on private jets and perks paid for out of the civic fund.”

$2 million payment to Phila. tax-amnesty program [Philadelphia Inquirer]
Philly’s tax amnesty program received a $2 million payment on Tuesday, it’s biggest since the program started on May 3. Collections so far have reached $18 million, according to city officials. They also expect to reach their goal of receiving between $25 and $30 million by the end of the program on Friday.

Feinberg to quit pay czar post to focus on BP fund [Reuters]
This guy is a glutton for punishment.

Bring on the Reform, Banks Will Continue Doing Just Fine

“Despite the reality of impending financial reform, banking and financial services executives are bullish about their business prospects in the current year and 2011, with many investing for long-term growth and specifically focused on traditional services, emerging technologies and M&A as a means to generate growth.”

~ Scott Marcello, deputy leader of KPMG LLP’s Financial Services practice.

Does Anyone Have a Crayon for Mary Schapiro?

“The SEC’s efforts are, and will always be, a work in progress. We will continually refocus our energies as circumstances warrant, as new ideas are offered and considered, as we consider your opinions and suggestions. But the outlines are emerging, the colors are being filled in, and I am hopeful that a portrait of a financial marketplace more stable and efficient than the one we saw in 2008 is beginning to emerge.”

SEC Chair Mary Schapiro at CEO Quarterly Meeting of the Business Roundtable on the SEC’s ongoing efforts to color inside the lines. Apparently the Commission was free-handing all this time.